FLASH NOTE

NOT RATED
NLC INDIA | Utilities | 01 December 2022

Capacity addition largely on track

 Higher capacities in power as well as mining to boost profitability and Anupam Goswami
research@bobcaps.in
capitalise on the country’s strong power demand

 Renewable capacity addition will improve the capacity mix and contribute
to improved ESG scores

 Under-recovery at the TPS-II Exp plant to reduce, aiding improvement

in overall ROE

We interacted with Mukesh Agrawal, ED Finance, NLC India (NLC IN, Not Rated). Ticker/Price NLC IN/Rs 84
Key takeaways: Market cap US$ 1.4bn
Free float 21%
Regulated capex to boost bottomline: NLC is adding a 3200MW coal-based
52wk high/low Rs 92/Rs 56
thermal plant (3x800MW phase-I and 1x800MW phase-II) in Talabira, Odisha. Promoter/FPI/DII 79%/0%/21%
Management expects the plant to be commissioned by 2027-28. Capex for phase-I Source: NSE | Price as of 1 Dec 2022

totals Rs 194.2bn or ~Rs 6.06 per MW, implying the addition of ~Rs 58.3bn to
regulated equity. The Talabira plant has been allotted the Panchwara coal block Key financials
Y/E 31 Mar FY20A FY21A FY22A
(9MT normative output, 13MT peak) in Jharkhand which the company is developing
Total revenue (Rs mn) 79,119 75,644 1,01,300
in joint venture with the state government, to be commissioned in 2028.
EBITDA (Rs mn) 27,698 22,642 37,226
Adj. net profit (Rs mn) 14,173 10,573 8,470
TPS II Exp under-recovery to stabilise: TPS II Exp is the country’s first power
Adj. EPS (Rs) 10.2 7.6 6.1
plant based on circulating fluidised bed combustion (CFBC) technology. Due to
Adj. ROAE (%) 3.7 2.9 2.5
technical constraints, the plant is running at low availability and load factors (PAF/ Adj. P/E (x) 8.2 11.0 13.7
PLF). Of NLC’s total under-recovery of Rs 1.9bn in H1FY23, the TPS II Exp plant EV/EBITDA (x) 5.3 5.6 2.3
accounts for ~Rs 1.2bn which is expected to reach ~Rs 2.2bn in FY23. However, Adj. EPS growth (%) 11.6 (28.5) 22.4
management has indicated that the company is taking necessary measures to raise Source: Company, Bloomberg, BOBCAPS Research

availability to 80-85% by FY24, which should ease under-recovery and improve ROE.
Stock performance

Renewable capacity addition on track: NLC’s renewable energy capacity is at NLC NSE Nifty (Relative)
130
1.4GW out of its total capacity of 5GW. About 4.5GW is in the planning and
110
tendering stage, and the company aims to reach 6GW in renewable capacity by
90
2030 to achieve a healthy balance with its thermal plants. Ramp-up of these 70
capacities will also improve NLC’s ESG scores. 50
30
Dec-19

Jun-20
Aug-20
Nov-20

Aug-21
Nov-21

Aug-22
Nov-22
Mar-20

Mar-21
May-21

Feb-22
May-22

Capacity addition at JV/subsidiary level: The company’s Ghatampur (Uttar

Pradesh) thermal power plant (3x 660MW) is ready for commissioning, and each
Source: NSE
phase of 660MW will be commissioned every four months starting Mar’23.

Coal ramp-up on the cards: From current coal production of 6MT in FY22 (20MT
capacity), NLC plans to ramp up output to 13MT in FY23 and close to 20MT in
FY24. The company has tied up ~8MT with NTPC and the balance will be sold in
the open market which will fetch higher realisations given elevated global prices.

BOB Capital Markets Ltd is a wholly owned subsidiary of Bank of Baroda

Important disclosures and analyst certifications are provided at the end of the report.
NLC INDIA

Financials
Income Statement Per Share
Y/E 31 Mar (Rs mn) FY18A FY19A FY20A FY21A FY22A Y/E 31 Mar (Rs) FY18A FY19A FY20A FY21A FY22A
Total revenue 84,472 80,053 79,119 75,644 1,01,300 Reported EPS 13.3 9.1 10.2 7.3 8.9
EBITDA 30,605 23,935 27,698 22,642 37,226 Adjusted EPS 12.9 9.4 10.2 7.6 6.1
Other income 5869 9134 12170 17169 8059 Dividend per share 4.2 4.8 7.1 1.0 1.5
Depreciation 8612 7457 9584 12316 15281 Book value per share 96.2 90.2 91.2 93.5 99.6
EBIT 27,862 25,612 30,284 27,495 30,004
Finance Cost 2050 3901 8204 9806 7838 Valuations Ratios
Exceptional items (594) 352 34 468 (3898) Y/E 31 Mar (x) FY18A FY19A FY20A FY21A FY22A
EBT 26,407 21,359 22,046 17,221 26,064 EV/Sales 2.2 1.5 1.9 1.7 0.8
Income taxes 7919 8689 7907 7116 13696 EV/EBITDA 6.2 4.9 5.3 5.6 2.3
Reported net profit 18,488 12,670 14,139 10,105 12,368 Adjusted P/E 6.5 8.9 8.2 11.0 13.7
Adjustments (594) 352 34 468 (3898) P/BV 0.9 0.9 0.9 0.9 0.8
Adjusted net profit 17,893 13,022 14,173 10,573 8,470
DuPont Analysis
Balance Sheet Y/E 31 Mar (%) FY18A FY19A FY20A FY21A FY22A
Y/E 31 Mar (Rs mn) FY18A FY19A FY20A FY21A FY22A Tax burden (Net profit/PBT) (0.3) 0.6 0.6 0.6 0.5
Accounts payables 15,525 19,881 18,309 15,122 10,765 Interest burden (PBT/EBIT) 12.9 5.5 2.7 1.8 3.3
Other current liabilities 20,813 19,202 24,742 24,579 20,111 EBIT margin (EBIT/Revenue) 0.3 0.3 0.4 0.4 0.3
Provisions 6578 5101 7483 4651 5727 Asset turnover (Rev./Avg TA) 0.3 0.2 0.2 0.2 0.3
Debt funds 75,081 1,19,845 1,50,116 1,33,979 91,111 Leverage (Avg TA/Avg Equity) 2.4 2.8 3.0 2.9 2.4
Other liabilities 73,721 57,681 57,536 62,893 70,632 Adjusted ROAE (0.8) 0.7 0.4 0.2 0.3
Equity capital 15286 13866 13866 13866 13866
Reserves & surplus 1,18,060 1,11,247 1,12,529 1,15,725 1,24,200 Ratio Analysis
Shareholders’ fund 1,33,346 1,25,113 1,26,395 1,29,591 1,38,066 Y/E 31 Mar FY18A FY19A FY20A FY21A FY22A
Total liab. and equities 3,25,064 3,46,823 3,84,580 3,70,815 3,36,411 YoY growth (%)
Cash and cash eq. 2,786 3,172 3,733 6,174 6,620 Revenue 8.6 (5.2) (1.2) (4.4) 33.9
Accounts receivables 33,662 46,062 66,918 56,112 31,287 EBITDA 21.9 (21.8) 15.7 (18.3) 64.4
Inventories 16,889 14,644 13,246 14,217 10,253 EPS (22.0) (31.5) 11.6 (28.5) 22.4
Other current assets 48,012 26,457 21,621 23,577 20,763 Profitability & Return ratios (%)
Investments 24214 28236 35194 36220 39237 EBITDA margin 36.2 29.9 35.0 29.9 36.7
Net fixed assets 1,05,678 1,16,782 1,83,018 2,00,212 1,90,092 EBIT margin 33.0 32.0 38.3 36.3 29.6
CWIP 68761 87356 40836 10197 10124 Adjusted profit margin 0.2 0.2 0.2 0.1 0.1
Intangible assets 63 63 64 1,408 1,847 Adjusted ROAE 5.5 3.8 3.7 2.9 2.5
Deferred tax assets, net - - - - - ROCE 13.4 10.5 11.0 10.4 13.1
Other assets 25,000 24,053 19,952 22,699 26,188 Working capital days (days)
Total assets 3,25,064 3,46,823 3,84,580 3,70,815 3,36,411 Receivables 143.5 207.1 304.5 267.0 111.2
Inventory 72.0 65.9 60.3 67.7 36.4
Cash Flows Payables 66.2 89.4 83.3 72.0 38.3
Y/E 31 Mar (Rs mn) FY18A FY19A FY20A FY21A FY22A Ratios (x)
Cash flow from 37,607 4,987 11,681 40,516 60,857 Gross asset turnover 0.4 0.3 0.3 0.2 0.4
operations
Capital expenditures (32,325) (30,503) (26,976) (8,831) (2,107) Current ratio 2.4 2.0 2.1 2.3 1.9
Change in investments 0 (4,022) (6,958) (1,026) (3,107) Net interest coverage ratio 13.6 6.6 3.7 2.8 3.8
Other investing cash flows 1,339 2,692 2,478 1,745 3,986 Adjusted debt/equity 0.5 0.9 1.2 1.0 0.6
Cash flow from investing (30,986) (31,833) (31,456) (8,112) (1,228) Source: Company, BOBCAPS Research | Note: TA = Total Assets
Equities issued/Others 0 (12558) 0 0 0
Debt raised/repaid 17,607 44,465 36,142 (18,628) (48,106)
Interest expenses (4876) (7680) (11574) (10990) (7652)
Dividends paid (7747) (8070) (11602) (1392) (4159)
Other financing cash flows (11700) 10700 6800 0 0
Cash flow from (6,716) 26,858 19,766 (31,010) (59,918)
financing
Chg in cash & cash eq. (94) 12 (8) 1,394 (288)
Closing cash & cash eq. 126 138 130 1,524 1,235

EQUITY RESEARCH 2 01 December 2022

NLC INDIA

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